Joe Genius of ABC Corporation Is Considering Whether to Lease

question 6

Multiple Choice

Joe Genius of ABC Corporation is considering whether to lease or purchase a large capital asset.If he purchases the asset,he will use debt financing.Which of the following is a true statement describing a similarity in the tax treatment of leasing and purchasing with debt?

• A) Both allow for a tax deduction.
• B) Principal payments are deductible for both alternatives.
• C) Cash payments and tax savings will usually occur simultaneously for both alternatives.
• D) Capital cost allowance is always calculated for both alternatives.

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Definitions:

Process Cost Accounting

Process cost accounting is a method of accounting that accumulates costs for each process within the production cycle, suitable for industries producing homogeneous products.